A commenter writes at the post, The Carrier "Deal" and Trump Apologists, in response to my objection to Trump's "deal":
"Capitalism breathes through loopholes" - Ludwig Von Mises, and quoted by you here and elsewhere.If that is the best that the fanboys can do to support Trump, they are going to have a long four years. The commenter actually links to a post where I discuss tax reform and where I call instead for just tax cuts. I did not in the post argue in favor of tax credits.
Trump is creating a reduced tax burden for a company that otherwise would not do business in the USA. In essence, a loophole in which capitalism is allowed to breathe. You condemned Rand Paul for wanting to close loopholes, yet you condemn Trump for creating just such a loophole.
I have consistently called for tax cuts from the current tax structure rather than changes to the tax structure.
In 2015, I wrote:
On Monday, I posted a back and forth exchange, between Prof, Walter Block and Cato policy analyst Jason Bedrick, on school tax credits.I note that nowhere in Trump's speech did he say: "Since we are giving Carrier this tax credit, we are going to have to cut government spending by this amount."
Since tax credits are a subject that is likely to come up often in current day policy discussions, I want to use the exchange between Block and Bedrick as a jumping off point to discuss tax credits in general, from a libertarian perspective.
First it must be noted, indeed emphasized, that
the true libertarian position should be that the government shouldn't be taxing anyone in the first place. Thus, the entire discussion of tax credits is within a framework that is one step away from the pure libertarian perspective .
This means that tax credits, at best, can only be discussed by the true libertarian on a strategic level, from the perspective of how much closer do such credits move us in the direction of a libertarian society.
Bedrick during his exchange with Block seems to consider this strategic view, in part, in his advocacy of school tax credits. He writes:
[T]hey have the added benefit of letting people keep more of their own money and reducing government revenue.But is this really the case? Technocrats when they propose tax credits, tax deductions, etc, often couple it with offsetting tax increases elsewhere.
Indeed. what is really going on with this tax credit is that the government spending burden by the amount of the tax credit is just going to result in the pressure point for the amount of the credit placed on another sector of the economy through increased taxes or government borrowing.
The tax credit did not shrink government or the spending burden, it shifted it for the benefit of government leaders---in this case, Trump.
When Mises made his comments about tax loopholes, it should be remembered that he did it in the context of a period when tax rates were very high. Thus, broad-based tax loopholes such as accelerated depreciation or interest rate deductions really did keep the economy going, otherwise many, many firms would have shut down.
Tax cuts are best but broad-based tax loopholes are a sloppy fitting way to reduce a tax rate. The more specific a tax break (aimed at one company or sector), as opposed to a broad-based break, the more gimmicky it becomes and is thenreally just a method to only distort the economy in favor of the elites.
To the degree a tax loophole is just allowing a company or individual to reduce a tax burden on spending it is already doing, it is a tax cut. To the degree, it causes different structures of corporate or individual spending it is likely to be a distortion of the economy.
In the Carrier case, it is a distortion of the economy for the benefit of a wacky Trump photo op. Or is Trump going to negotiate the same deal with every firm that threatens to move to Mexico?
Hey, Donnie, the weather is much better down south, I moving my personal computer and me down there unless I get some serious tax credits, have Pence call me.
Trump didn't set some broad-based policy here of tax credits (even for a crony limited area) he set it for one company--for his benefit. This is off-the-wall bizarre stuff.